Retail in Asia

In Telligence

A look into the democratization of luxury brands in China, will they lose their shine or buy into the aspiration of today’s youth?

Last summer, Louis Vuitton was one of the first major luxury brands to return to a physical fashion show for its men’s spring/summer 2021 collection, holding an in-person show on the banks of Huangpu River in Shanghai instead of streaming the show virtually from Paris, like other brands were doing.

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Entering 2021, Fendi Couture Reshow was hosted at the Shanghai Exhibition Centre in March, then Christian Dior’s fall fashion show was presented in the Long Museum West Bund in April, during the Shanghai Fashion Week, and this trend seems here to stay at least till the Chinese can travel again.

On the evening of 3rd June, Coach brought winter into early Shanghai summer, presenting its 2021 winter collection at Shanghai Exhibition Centre. This is the American luxury brand’s latest runway show presentation in China since 2018, which also coincided with the brand’s 80 year anniversary.

Set in the 70s Drive-in Theatre backdrop, creative designer Stuart Vevers highlighted nostalgia and classic American pop culture influence from that time. The collection showcased Shearling coat, the neck and collar design of which is inspired by Coach’s first generation Creative Director Bonnie Cashin’s signature; while the Studio bag takes on Coach’s heritage archive design.

For Coach, which for a long time has been associating itself with affordable luxury, it’s obvious that it is working to elevate its brand position. The show is a latest example of cultural and heritage expression as luxury’s favourite way to connect with its audience. Today that seems to be the norm for these brands in China as well.

In an interview with Retail in Asia before the show, Coach China CEO Yann Bozec suggested, if possible, Coach would do fashion shows once every year.

Source: Coach

“We want to be an inclusive brand instead of a selective brand, meaning we also want to integrate our customers in China into the brand. China is constantly changing so fast, if you want to do something in China and waiting for HQ’s approval, you will never get things done in time. You have to trust your local team,” he said.

According to him, digitization, customer centricity and agility are the three pillars of the brand’s growth in China. For Coach, they have been actively utilizing digital tools, including big data and artificial intelligence to understand their Chinese customers in a more focused and efficient way.

“Last year, we did over a thousand customer surveys combing over 600 million data points to analyze consumers from all over China. To our surprise, even consumers who would generally be put in the same category, still present very different tastes and preferences if they live in different cities. Every two weeks, we will have a round table conversation with at least 10 consumers, so we have collected at least 250 samples in one year. We not only understand their taste in products, but also their lifestyle in the city they live in, what kind of service they prefer, what’s the best way to communicate with them…We have integrated these findings into our product design,” Bozec continued.

coach 1
Source: Coach

The exclusive luxury brands used to be reluctant in terms of digital transformation. However, the impact of the pandemic has forced them to embrace digitization. More importantly, digitization is not just a temporary fix for luxury brands to weather the Covid storm, it is also essential if they want to grow in China. Young consumers, usually born in the 80s and 90s, have become the main contributors of China’s luxury spending.

According to data from Tmall, Millennial spending accounts for over 70% of overall luxury fashion and lifestyle sales in 2020, while the size of Gen Z’s luxury spending grows over 100%. In 2020, major luxury brands, including Cartier, Gucci, Prada, Balenciaga, Armani, Saint Laurent, all joined Tmall Luxury Pavilion. Earlier this year, Coach became the first luxury brand that opened shopping service on Douyin.

“Two years ago, when our sales on the ground started to promote our products on Xiaohongshu, people at head office would still worry if it’s on brand, but now we simply have to be on these platforms,” Bozec said.

Although most luxury brands still are selective in terms of their product offering on the platform, such as Hermes, who only sell fragrance on Tmall, Gucci made a bold move late last year by opening two flagship stores on Tmall, one sells Gucci’s entire product lines and the other focuses on beauty.

As the biggest social platform in China, WeChat is still the Number one channel for luxury brands to reach its target audience. Burberry launched the first social retail boutique Burberry Space in July 2020 in collaboration with Tencent, the parent company of WeChat. Customers can receive bespoke shop tours and product information via its WeChat mini program.

Since the pandemic, luxury brands are increasingly diversifying their digital footprint. Livestreaming has become their latest experiment in the Chinese market. In March 2020, Louis Vuitton debuted its first livestream on Xiaohongshu, which is also the first luxury brand to launch livestream on Xiaohongshu. Since then, more and more luxury brands appeared on livestreams, with Gucci being one of the latest.

In March this year, Gucci’s ambassador Han Lu showed up in livestream with Jiaqi Li, one of the top livestreamers in China, which attracted over 12 million viewers and the highlighted Poudre De Beauté Mat Naturel powder instantly sold out after their promotion during the livestream.

Bottega Veneta also appeared in Jiaqi Li’s livestream, 230 mini Pouch, priced at 12300 RMB each, sold out in 10 seconds. In addition to a physical show in the center of Shanghai, the Coach show was also livestreamed online via all social media platforms in China. On Weibo, #coachshow livestream received over 100 million views.

However, livestream is not all the raging success for luxury brands. The hard sell and mass sales approach, coupled with high discount could derail well preserved exclusive brand images into lower end market positioning, losing the lust they strive for.

In the past five years countless luxury brands spearheaded into the lucrative fashion market in China, usually by partnering with Chinese companies like Tmall. But recently, these brands have realised they cannot expect continuous commercial performance in China without shifting their focus from their European and US headquarters to China as well. The most notable one is the growing number of fashion shows in China.

Coach 2
Source: Coach

The pandemic accelerated this trend as well. The majority of Chinese spending on luxury brands happened outside of China before the pandemic, but now they have moved their luxury spending at home and online. According to Bain & Company, the  luxury goods market in China grew 48 per cent last year as travel disruptions boosted domestic spending. But Chinese consumers still want the interaction and appreciation for the cultural heritage that these brands represent if they cannot travel to Paris, Milan or New York, therefore, brands must invest in new ways to engage with them culturally and locally.

Heritage brands therefore highly favour art and cultural exhibitions to interact with their Chinese customers, serving as a tool for communication and brand building to increase the desirability of the brand products.

Dior hosted its “Designer of Dreams” exhibition July last year, which became the first major international luxury event in China since the pandemic.

Louis Vuitton chose Wuhan as the first stop of its new travelling exhibition See LV, which charts 160 years of the brand’s history.

Valentino curated RE-SIGNIFY PART ONE SHANGHAI exhibition at The Power Station of the Arts in Shanghai late last year.

Following its debut in Florence, Gucci Garden Archetypes Exhibition begins its global tour with a stop in Shanghai, from May to August, as part of Gucci’s 100th anniversary celebrations.

Hermes has been holding its Metiers d’Art exhibitions, along with numerous other cultural exhibitions since the early 2000s.

The blurring of boundaries between art and luxury, a well-practiced trend by the leading luxury players, is one that works exceedingly well in China as Chinese people view art as the ultimate luxury. Chinese museum goers are young, they are usually novelty-loving, style-conscious millennials. By visiting museums and appreciating fine art, they demonstrate a high level of taste, as opposed to simply owning luxury products.

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In the past decade, the democratisation of luxury retail helped luxury brands become more accessible, but this is not without risks, i.e potentially damaging a luxury brands’ aura of exclusivity. Through exhibitions and an association with the arts, heritage brands create the illusion of inclusiveness and accessibility, while still upholding their luxury status via artistic expression — Not everyone can afford a luxury product, but a museum ticket and experience is within reach, and more importantly it builds one’s cultural knowledge which today is a key aspiration of China’s luxury youth.